Wednesday, April 17, 2013

Mark Thoma on Empirical Macro

Students of econometrics, and anyone doing empirical work in (macro)economics, would benefit from reading what Mark has to say about the use of historical data vs. experimental data.I won't spoil the story by repeating it here, but his bottom line is:

"I used to think that the accumulation of data along with ever improving empirical techniques would eventually allow us to answer important theoretical and policy questions. I haven’t completely lost faith, but it’s hard to be satisfied with our progress to date. It’s even more disappointing to see researchers overlooking these well-known, obvious problems – for example the lack of precision and sensitivity to data errors that come with the reliance on just a few observations – to oversell their results".